1. LECTURE 14 TUESDAY, 13 OCTOBER STA 291 Fall 2009 1

2. Preview of Coming Attractions Ch 7 Scatter plots, association and correlation Ch 5 Probability 2

3. Sample Measures of Linear Relationship Sample Covariance: Sample Correlation Coefficient: Population measures: Divide by N instead of n-1 3

4. r Measures Fit Around Which Line? As you’ll see in the applets, putting the “best” line in is, uh, challenging—at least by eye. Mathematically, we choose the line that minimizes error as measured by vertical distance to the data Called the “least squares method” Resulting line: where the slope, and the intercept, 4

5. 5 What line? r measures “closeness” of data to the “best” line. How best? In terms of least squared error:

6. 6 “Best” line: least-squares, or regression line Observed point: (x i, y i ) Predicted value for given x i : (How? Interpretation?) “Best” line minimizes, the sum of the squared errors.

7. 7 Interpretation of the b 0, b 1 b 0 Intercept: predicted value of y when x = 0. b 1 Slope: predicted change in y when x increases by 1. b 0 Intercept: predicted value of y when x = 0. b 1 Slope: predicted change in y when x increases by 1.

8. 8 Interpretation of the b 0, b 1, In a fixed and variable costs model: b 0 =9.95? Intercept: predicted value of y when x = 0. b 1 =2.25? Slope: predicted change in y when x increases by 1.

9. 9 Properties of the Least Squares Line b 1, slope, always has the same sign as r, the correlation coefficient—but they measure different things! The sum of the errors (or residuals),, is always 0 (zero). The line always passes through the point.

10. Chapter 5: Probability Abstract but necessary because this is the mathematical theory underlying all statistical inference Fundamental concepts that are very important to understanding Sampling Distribution, Confidence Interval, and P-Value Our goal for Chapter 6 is to learn the rules involved with assigning probabilities to events PopulationSample Probability (Inferential) Statistics 10

11. Probability: Basic Terminology Experiment: Any activity from which an outcome, measurement, or other such result is obtained. Random (or Chance) Experiment: An experiment with the property that the outcome cannot be predicted with certainty. Outcome: Any possible result of an experiment. Sample Space: The collection of all possible outcomes of an experiment. Event: A specific collection of outcomes. Simple Event: An event consisting of exactly one outcome. 11

12. Experiments, Outcomes, Sample Spaces, and Events Examples: Experiment 1. Flip a coin 2. Flip a coin 3 times 3. Roll a die 4. Draw a SRS of size 50 from a population Sample Space 1. 2. 3. 4. Event 1. 2. 3. 4. 12

13. Complement Let A denote an event. The complement of an event A: All the outcomes in the sample space S that do not belong to the event A. The complement of A is denoted by A c Law of Complements: Example: If the probability of getting a “working” computer is 0.7, what is the probability of getting a defective computer? S A 13

14. Union and Intersection Let A and B denote two events. The union of two events: All the outcomes in S that belong to at least one of A or B. The union of A and B is denoted by The intersection of two events: All the outcomes in S that belong to both A and B. The intersection of A and B is denoted by 14

15. Additive Law of Probability Let A and B be any two events in the sample space S. The probability of the union of A and B is S AB 15

16. Additive Law of Probability Example: At a large University, all first-year students must take chemistry and math. Suppose 85% pass chemistry, 88% pass math, and 78% pass both. Suppose a first-year student is selected at random. What is the probability that this student passed at least one of the courses? S CM 16

17. Disjoint Sets Let A and B denote two events. Disjoint (mutually exclusive) events: A and B are said to be disjoint if there are no outcomes common to both A and B. The notation for this is written as Note: The last symbol denotes the null set or the empty set. S AB 17

18. Assigning Probabilities to Events The probability of an event is a value between 0 and 1. In particular: – 0 implies that the event will never occur – 1 implies that the event will always occur How do we assign probabilities to events? 18

19. Assigning Probabilities to Events There are different approaches to assigning probabilities to events Objective – equally likely outcomes (classical approach) – relative frequency Subjective 19

20. Equally Likely Approach (Laplace) The equally likely outcomes approach usually relies on symmetry/geometry to assign probabilities to events. As such, we do not need to conduct experiments to determine the probabilities. Suppose that an experiment has only n outcomes. The equally likely approach to probability assigns a probability of 1/n to each of the outcomes. Further, if an event A is made up of m outcomes, then P (A) = m/n. 20

21. Equally Likely Approach Examples: 1. Roll a fair die – The probability of getting “5” is 1/6 – This does not mean that whenever you roll the die 6 times, you definitely get exactly one “5” 2. Select a SRS of size 2 from a population 21

22. Relative Frequency Approach (von Mises) The relative frequency approach borrows from calculus’ concept of limit. Here’s the process: 1. Repeat an experiment n times. 2. Record the number of times an event A occurs. Denote that value by a. 3. Calculate the value a/n 22

23. Relative Frequency Approach We could then define the probability of an event A in the following manner: Typically, we can’t can’t do the “n to infinity” in real- life situations, so instead we use a “large” n and say that 23

24. Relative Frequency Approach What is the formal name of the device that allows us to use “large” n? Law of Large Numbers: – As the number of repetitions of a random experiment increases, – the chance that the relative frequency of occurrences for an event will differ from the true probability of the event by more than any small number approaches 0. 24

25. Subjective Probability A subjective probability relies on a person to make a judgment as to how likely an event will occur. The events of interest are usually events that cannot be replicated easily or cannot be modeled with the equally likely outcomes approach. As such, these values will most likely vary from person to person. The only rule for a subjective probability is that the probability of the event must be a value in the interval [0,1] 25

26. Probabilities of Events Let A be the event A = {o 1, o 2, …, o k }, where o 1, o 2, …, o k are k different outcomes. Then P(A)=P(o 1 )+P(o 2 )+  +P(o k ) Problem: The number on a license plate is any digit between 0 and 9. What is the probability that the first digit is a 3? What is the probability that the first digit is less than 4? 26

27. Conditional Probability & the Multiplication Rule Note: P(A|B) is read as “the probability that A occurs given that B has occurred.” Multiplied out, this gives the multiplication rule: 27

28. Multiplication Rule Example The multiplication rule: Ex.: A disease which occurs in.001 of the population is tested using a method with a false-positive rate of.05 and a false-negative rate of.05. If someone is selected and tested at random, what is the probability they are positive, and the method shows it? 28

29. Independence If events A and B are independent, then the events A and B have no influence on each other. So, the probability of A is unaffected by whether B has occurred. Mathematically, if A is independent of B, we write: P(A|B) = P(A) 29

30. Multiplication Rule and Independent Events Multiplication Rule for Independent Events: Let A and B be two independent events, then P(A  B)=P(A)P(B). Examples: Flip a coin twice. What is the probability of observing two heads? Flip a coin twice. What is the probability of getting a head and then a tail? A tail and then a head? One head? Three computers are ordered. If the probability of getting a “working” computer is 0.7, what is the probability that all three are “working” ? 30

31. Attendance Survey Question 14 31 On a your index card: – Please write down your name and section number – Today’s Question: